{"id":1992,"date":"2025-04-14T10:30:41","date_gmt":"2025-04-14T10:30:41","guid":{"rendered":"https:\/\/www.goodada.com\/blog\/?p=1992"},"modified":"2025-04-14T10:30:41","modified_gmt":"2025-04-14T10:30:41","slug":"reduce-tariff-risks-with-contracts","status":"publish","type":"post","link":"https:\/\/www.goodada.com\/blog\/reduce-tariff-risks-with-contracts\/","title":{"rendered":"Reduce Tariff Risks with contracts"},"content":{"rendered":"

How Purchase Contracts Can Help Firms Reduce the Impact of Global Tariffs<\/span><\/h2>\n

Reduce tariff risks with contracts – If you’re like many of the companies I’ve spoken with lately, you’re probably feeling whiplash from the latest global tariff announcements coming from the White House. There’s a 10% duty slapped one week on everything; the next week, it’s a 90-day pause\u2014but only for some countries. Meanwhile, China’s tariffs hit 125%, and everyone’s scrambling to figure out what it means for their bottom line. It’s messy, confusing, and more than a little frustrating.<\/p>\n

Over my 20+ years of International Trade Consulting, I’ve seen firsthand how sudden changes in trade policy can throw even the best-run supply chains into disarray. But I’ve also seen how businesses that treat their contracts as living, strategic tools\u2014not just legal paperwork\u2014can shield themselves from the worst of it.<\/p>\n

In this blog, I want to show you how well-written purchase contracts can give your company resilience in the face of tariff chaos. These aren’t abstract ideas\u2014we’re talking real clauses, tested strategies, and examples that have worked for companies facing the same volatility you are.<\/p>\n

The Tariff Landscape: Volatile, Political, and Global<\/span><\/h2>\n

The U.S.-China trade war is still ongoing, and we’re seeing its latest chapter unfold with a fresh wave of tariffs under Executive Order 14098. Virtually all U.S. imports now carry at least a 10% duty, with China singled out for a 125% rate. In the space of a few days, entire sourcing plans can become economically unviable. There is still a lack of complete understanding about what is happening to Smartphones, their components, etc.<\/p>\n

This unpredictability isn’t letting up. Tariffs continue to be wielded as political weapons, with new measures and retaliations emerging regularly. So, instead of hoping it all settles down, we need to ask how we can build flexibility into our businesses. And that starts with contracts.<\/p>\n

Contracts as Risk Management Tools<\/span><\/h2>\n

If there’s one message I want to drive home on how to reduce tariff risks with contracts, it’s this: contracts are not just back-office legal documents. They’re strategic shields. They can help you pass on costs, renegotiate terms, switch suppliers, and tap into trade agreements that keep your goods moving\u2014and your margins intact.<\/p>\n

Here are five smart ways to upgrade your purchase contracts so they work for you\u2014not against you\u2014when tariffs spike:<\/p>\n

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1. Strengthen Force Majeure Clauses to Include Tariffs<\/span><\/h3>\n

This one’s often overlooked. Most force majeure clauses talk about floods and fires but not tariffs. That’s a mistake.<\/p>\n

Update your clauses to cover “material changes in trade policy, tariffs, sanctions, and import\/export restrictions.” And don’t be vague\u2014specify a threshold (e.g., tariffs that increase by more than 15%) and what happens next. Can you renegotiate? Pause the contract?<\/p>\n

Real example<\/strong>: Howmet Aerospace used this approach. When aerospace imports suddenly received a 20% tariff, they invoked force majeure and paused shipments. This caught the whole sector’s attention and saved Howmet a lot of money.<\/p>\n

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2. Implement Price Adjustment and Cost-Sharing Mechanisms<\/span><\/h3>\n

If tariffs are going to raise your costs, you need to know how those costs are handled. Otherwise, you’re the one left holding the bill.<\/p>\n

You can include clauses that:<\/p>\n